Current Work

The Economy from a Sociological Perspective: Research Priorities

My research field is economic sociology. This subdiscipline of sociology explores the correlation between economic processes and the social and cultural structures in which economic action is embedded. My particular research interest is the functioning of markets as the most important mechanisms for the allocation of goods in capitalist economies.

Coordination problems
My theoretical point of departure is the coordination problems faced by market actors. In order for markets to establish themselves, the different participants have to cooperate with one another, they have to be able assess the value of the traded commodities, and competition has to be structured so as to create profit opportunities. If it were not possible to solve these three coordination problems, actors would be confronted with such uncertainty when making decisions that this would prevent the emergence of markets as sustainable and relatively stable structures.

The problem of uncertainty is thus the starting point for my research program. The specific sociological assumption here is that it is social structures rather than rational calculation or heuristics that are the key to overcoming the uncertainty reflected in the aforementioned coordination problems. Institutions, social networks, cultural frames, and social power all structure the actors’ decision-making situations and reduce complexity, thus facilitating the coordination of interactive relationships in markets.

How Markets Work
These fundamental considerations, essential for our understanding of markets, prompted my research team and me to analyze a diverse range of markets. Frequently we decided to analyze a specific market because it highlighted one of the coordination problems particularly clearly. For example, we chose the markets for contemporary art and wine to explore the issue of value and price determination. These markets are especially interesting because the significant price differentials reflect neither substantial differences in production costs nor intrinsic product characteristics. In the wine market, for instance, even the experts are unable to determine the price of a wine based on its flavor in a blind tasting. In these two markets, both the prices – for a bottle of wine or a work of art – and the assessment of the quality upon which these prices are based are socially assigned. Quality is the outcome of discursive processes in a market field and the successful establishment of institutions that signal reputation. In the art market, for instance, prices result from exhibitions in reputable galleries and museums, acquisitions by important art museums, interest from prominent critics, and the artist receiving prestigious awards. Thus, quality is established interactively within the field of art itself. Uncertainty is reduced by institutions and social networks. For outsiders, the assessments of quality in the respective market fields are often completely incomprehensible, which is reflected in derogatory comments such as “my two-year-old could have painted that!” Although our empirical research focuses on very specific markets, the underlying assumption is that we can identify mechanisms in these markets which have more general relevance and are therefore important for economic development as a whole.

Illegal Markets
One area of research we have focused on in recent years is illegal markets. Not only are the markets for drugs, human organs, stolen car parts, or fake designer clothes significant from an economic point of view, but they also provide us with a particularly interesting theoretical angle. What distinguishes illegal markets is that here the market actors cannot rely on the government to protect their property rights. In fact, they have to assume that the state will attempt to put a stop to their exchange activities. With the loss of legal protection from the state, the market is deprived of important institutional support for the solution of coordination problems, something which is taken for granted in legal markets. How can the actors in illegal markets develop sufficient trust in each other that they are willing to expose themselves to the risks of the exchange? This is a cooperation problem. It is no coincidence that illegal markets take the form of close networks, often structured on the basis of family relations, and that the participating enterprises remain small. Here, the importance of the state for the development of markets is thus apparent
ex negativo. Without the institutional protection of the state, a modern, highly diversified economy simply cannot develop.

Fictional Expectations
For some years now, I have also been focusing on another important question: What role do expectations play in markets? Economic decisions are oriented towards future outcomes. The future, however, cannot be predicted, it is uncertain. Our research shows that decisions about investment and innovation, but also in the consumer sector, are all shaped by “imagined futures.” Actors develop images of the future and tell “stories” about how a planned investment will generate profits. As an example of this, we only need to think of Silicon Valley’s current visions of the future or financial analysts’ forecasts about how the euro exchange rate will develop over the next year. When people play the lottery, an example of consumption, in the run up to the prize draw they are already dreaming about what they will do with all the money they have not yet won. These fantasies represent an important motive for consumer demand behavior. Such imagined futures are pivotal to the dynamics of the capitalist economy, both in terms of its growth and the recurrent economic crises. Taking perceptions of the future into account creates an image of economic actions that does not reduce those actions to rational calculation, but rather analyzes them as being based on stories that are believed to be credible, but that are, in fact, ultimately fictitious. This still applies despite the fact that market actors do their utmost to portray their assessments of the situation as being based solely on calculations and try as much as possible to incorporate all available information into those assessments.

The Bequest of Wealth and Social Inequality
While this research work aims to draw on sociological tools to help us to understand economic phenomena, another area of my research focuses on the relationship between sociology and law. My interest in legal issues is already apparent from my research on illegal markets. However, my work on bequeathing wealth is driven by this same interest. I have conducted comparative analyses looking at the development of inheritance law and inheritance tax law in France, Germany, and the US since the time of the French Revolution, attempting to explain the existence of ongoing legislative differences between these countries. Here I draw on one of the key observations of the French sociologist Emile Durkheim that existing legal institutions allow us to make inferences about the moral composition of a society. My historical analysis illustrates that each of the three aforementioned countries views the issue of inherited wealth differently, in terms of the role of the family and the impact of large inheritances on democratic development, for instance. These discrepancies are reflected in the legislation. Building on these findings, we have also been focusing on how wealth inheritance affects the development of social inequality, one of today’s most pertinent socio-political topics.